Incentive Mechanisms and Corporate Overseas Compliance Behavior: An Analysis Based on Behavioral Economics Perspective

School of Economics, Zhejiang University of Finance & Economics, Hangzhou, 310018, China

^* Corresponding author: 220110920829@zufe.edu.cn

Abstract

In the context of globalization, corporate overseas business activities are flourishing. Companies expand their international markets through exports, establishing overseas branches, and mergers and acquisitions. However, they face challenges such as legal and regulatory differences, policy environments, market cultural disparities, economic fluctuations, political risks, and cultural conflicts. To ensure compliance, companies need to establish effective compliance mechanisms, adhering to local laws and international business ethics. Behavioral economics provides a new perspective for understanding and designing incentive mechanisms by considering individual psychological traits, cognitive biases, and social influences. This allows companies to design more targeted incentive mechanisms to promote compliance behavior among employees. The combination of positive encouragement and negative constraints, along with the integration of theories such as fairness preference, mental accounting, and loss aversion, can enhance the effectiveness of incentive mechanisms. However, the design and implementation of incentive mechanisms still face challenges such as individual differences, the gap between cognition and reality, and the diversity and personalization of incentives. Companies need to leverage the theoretical tools of behavioral economics to optimize incentive mechanisms, reduce compliance risks, enhance market competitiveness and reputation, and support steady development in complex international environments.